* Telecom Italia says gets $1 bln offer for T.Argentina
* U.S. fund in talks to buy controlling stake in T.Argentina
* Telecom Italia seeks to raise 4 bln euros via asset, bond
* Company aims to fix balance sheet, avoid more downgrades
* Fitch says steps not enough to significantly reduce debt
By Danilo Masoni and Alejandro Lifschitz
MILAN/BUENOS AIRES, Nov 8 Telecom Italia
may sell a controlling stake in Telecom Argentina
to investment fund Fintech, as part of a new strategy
aimed at raising 4 billion euros ($5.4 billion) to avoid a
credit downgrade and revive its business.
Telecom Italia Chief Executive Marco Patuano, who has
recently taken over from Franco Bernabe, unveiled a set of
proposed disposals late on Thursday that includes the sale of
22.7 percent of Telecom Argentina.
Patuano said on Friday the company had received a $1 billion
offer for its stake.
He did not name the bidder, but Fintech's Mexican owner
David Martinez told Argentina's media regulator his U.S. based
fund was in talks with the Italian company about the stake sale,
a spokesman for the regulator told Reuters on Friday.
A further step in Telecom Italia's new plan was issuing a
convertible bond for 1.3 billion euros ($1.7 billion).
The company is also planning to reap around 2 billion euros
through the sale and lease-back of more than 17,000 towers in
Italy and Brazil as well as the disposal of Telecom Italia's
digital broadcasting business.
The plan does not envisage the sale of Telecom Italia's main
Latin American asset, a majority stake in Brazilian mobile phone
operator TIM Participacoes, which has been at the
centre of speculation over asset sales in recent months.
Speaking at a news conference on the plan, Patuano said the
offer for Telecom Argentina was "worth around $1 billion".
If a deal is struck, Fintech may have to sell its 40 percent
stake in Cablevision, Argentina's biggest cable television
company, as local regulations limit cross holdings between
telecoms and media firms.
The spokesman said that Martinez had indicated he would be
prepared to exit Cablevision.
At 1527 GMT, Telecom Italia shares were down 7 percent to
0.669 euros on the Milan stock exchange, while Telecom Argentina
shares fell 1. percent to 36.4 pesos in Buenos Aires.
The plan outlined on Thursday by Telecom Italia has the
backing of Spanish rival Telefonica, which is also the
largest shareholder in the Italian company.
Telefonica agreed in September to gradually take over the
Italian group after striking a deal with Italian investors
Mediobanca, Generali and Intesa Sanpaolo
, with which it shares control of Telecom Italia.
Patuano said the measures would help his heavily indebted
company to support investments in recession-hit Italy and in the
growing Brazilian market while strengthening its balance sheet.
But credit rating agency Fitch said Telecom Italia must
address earnings erosion at home to avoid being downgraded to
'junk' as planned asset sales and a mandatory convertible bond
unveiled on Thursday are unlikely to help cut debt.
"The group's third-quarter results show that its domestic
operations remain under significant pressure," Fitch said on
Friday. "The company's ability to maintain its investment-grade
rating therefore continues to depend on significantly slowing
the rate of decline in EBITDA (core earnings) in 2014."
Telecom Italia's nine-month core profit was down 10.5
percent to 7.93 billion euros.
Fitch rates Telecom Italia's long-term rating at "BBB-",
just one notch above non investment grade.
Telecom Italia was able to raise its full targeted amount of
1.3 billion euros through the 6.75-pct mandatory convertible
bond, which will be redeemed in ordinary shares in 2016.
But Fitch, which sees considerable execution risks for the
plan, said the bond would not qualify for equity credit and
would not help Italy's biggest operator to cut its debt of
nearly 29 billion debt.
Investors sold Telecom Italia shares to rebalance portfolios
after buying into the convertible bond, traders said.
Analysts said Telecom Italia was forced to take some drastic
new measures to try and address underperformance after being hit
by a long recession and a price war in Italy. For more than a
year Telecom Italia hesitated on which way to go, twice
rebuffing approaches from non-European investors.
"The company has a revolver pointing at its head. They have
to do it," a Milan-based fund manager said. "It's a step in the
right direction." In the last three months, Telecom Italia's
stock has risen 46 percent on talk there would be asset sales.
Patuano told analysts on Thursday he considered lucrative
Brazilian unit TIM a core asset. But he added that the unit may
be sold at a "convincing price".
A source familiar with the matter has said Telecom Italia
wants at least 9 billion euros for its stake in TIM.